The Relation Between Business Growth and Job Growth

Sometimes it seems like a vicious cycle, we need job growth to increase consumer spending, to convince companies that growth will pay off, so they will add jobs, which will increase consumer spending, to….

Andy Grove the founder of Intel wrote an interesting piece for the Seattle Times recently, We Must Rebuild Structure to Create U. S. Jobs. You might think an icon of the high-tech industry would not be overly concerned about manufacturing off-shoring, but in the end it’s all about the stuff. Intel is a manufacturing company. Common wisdom says that the way to rebuild the U. S. Economic Engine is to promote high-tech start-ups. Many Economic Development Organizations focus on these efforts. The ubiquitous Business Plan Contest is one example. Trying to improve the market of start-up funding is another. This approach overlooks a number of issues.

Grove identifies them as scaling and innovation. His definition of scaling falls directly into work being done by the Edward Lowe Foundation at YourEconomy.org. They have been looking at company growth and job creation from a net perspective by region and have made some interesting findings across regions. It holds pretty true across regions that net growth in establishments and in jobs happens after companies reach a certain size and a certain longevity, which may vary by region. These are the companies that Grove identifies as companies that are scaling, going from prototype to mass production. The concept of scaling applies across industries, not just manufacturing companies. These are also the companies that are least likely to receive help from EDOs who focus on encouraging start-ups or retention and recruitment of large, mature companies. I’ve talked a great deal about innovation in some of my other posts.

When I am out calling on these high growth, second stage or mid-tier companies, I hear one major concern. They need to find more customers. The strategies vary. These are some of the things that these companies are involved in doing.

Competitor research to identify competitor strengths and weaknesses and create competitive advantages

Local trend analysis to discover where the potential growth is in their trade area. Surprisingly, this can often be counter the national trends

GIS mapping to identify like customers outside their traditional trade area

These are the activities that I would like to see EDOs support. The cost of tools and data has come within reach of smaller companies within the last ten years, but they are still difficult for a company with sales under $10 million to access and interpret on their own.